Cassation File Number 216672
Date of Judgment: May 1, 2014 E.C..
Summary of Facts: Following a divorce decree, the court ordered the partition of a marital home, subject to the prior settlement of a mortgage debt held by Oromia International Bank. The applicant alleged that while the loan was being serviced through regular monthly payments, the Bank proceeded to sell the property via auction to the 2nd Respondent without providing the mandatory 30-day notice or any legal basis for default. The lower courts dismissed the claim for lack of subject matter jurisdiction, citing the restrictive provisions of Proclamation No. 97/90.
Legal Rule (Interpretation of Law): Regular courts possess the subject matter jurisdiction to entertain a suit for the annulment of a foreclosure sale contract if the plaintiff alleges that the bank exercised its power of sale in the absence of a legal default. The statutory immunity from court intervention granted to banks is conditional upon a verified breach of the loan agreement.
Reasoning: Under Articles 3 and 4 of Proclamation No. 97/90, a bank’s right to sell collateral only matures when a debt is not paid within the specified timeframe. While procedural errors during a valid foreclosure may be limited to compensation, a sale conducted while a debtor is complying with their payment schedule is a fundamental breach of contract and an extra-legal deprivation of property rights that remains a justiciable matter under Article 37(1) of the FDRE Constitution.
Ruling: The lower court decisions were reversed, and the case was remanded to the Federal High Court to determine if the foreclosure sale should be annulled based on the status of the loan payments.
Cassation File Number 211694
Date of Judgment: February 28, 2014 E.C..
Summary of Facts: The applicant sued Buna International Bank to invalidate a performance guarantee it had paid to a third party, alleging the bank paid the claim without verifying if the contractual conditions for the guarantee were met. When the bank initiated foreclosure proceedings on the applicant’s collateral to recover the sum, the applicant sought a temporary injunction. The lower courts refused the injunction, ruling that bank foreclosures under Proclamation No. 97/90 cannot be stayed.
Legal Rule (Interpretation of Law): Courts may grant a temporary injunction under Articles 154 and 155 of the Civil Procedure Code to stay a bank foreclosure sale if the underlying debt or the validity of the guarantee agreement is the subject of a pending lawsuit.
Reasoning: A security interest or mortgage is an accessory obligation; if the primary obligation is contested as void, the bank’s right to sell the collateral is also called into question. To allow a foreclosure to proceed while the court is adjudicating the validity of the debt would render the final judgment nugatory and cause irreparable harm to the applicant’s right to property and judicial protection.
Ruling: The lower court’s refusal to grant the injunction was reversed, and the court ordered the foreclosure sale to be stayed pending the final outcome of the main litigation regarding the guarantee.
Cassation File Number 212593
Date of Judgment: Hamle 4, 2014 E.C..
Summary of Facts: A shareholder (applicant) sued the manager of a private limited company (PLC), alleging that his permanent residence in Canada prevented him from fulfilling his daily management duties. She further alleged conflict of interest, illegal hiring of relatives, and the unauthorized revocation of her power of attorney, seeking his removal and the dissolution of the company.
Legal Rule (Interpretation of Law): A court may remove a company manager for “good cause” if it is established that the manager is unable to fulfill the specific daily administrative and technical duties mandated by the memorandum of association. However, the dissolution of a company is a remedy of last resort and should be denied if the aggrieved shareholder can exit the company by selling their shares.
Reasoning: The memorandum of association established twelve specific daily duties for the manager. The respondent’s attempt to manage the company via email and periodic visits from Canada was found to be a fundamental failure of these obligations. While dissolution was inappropriate due to potential economic harm, the manager’s physical absence constituted “good cause” for his judicial removal.
Ruling: The court affirmed the refusal to dissolve the company but reversed the refusal to remove the manager, ordering the appointment of a new manager.
Cassation File Number 150290
Date of Judgment: Hamle 23, 2010 E.C..
Summary of Facts: The respondent sued the applicant for the return of $20,000 USD, claiming it was a personal loan. The applicant admitted receiving the money but argued it was an advance payment for a music concert. The appellate court ruled in favor of the respondent based on witness testimony and Hawala receipts.
Legal Rule (Interpretation of Law): Pursuant to Article 2472 of the Civil Code, any loan agreement for a sum exceeding 500 ETB can only be proved by a written contract, a court admission, or an oath. The law strictly prohibits the use of witness testimony or payment receipts as primary evidence to establish the existence of such a loan.
Reasoning: Where the nature of a transaction is disputed, the party claiming it is a loan must produce a written instrument signed by the debtor. In this case, the Hawala receipts and witnesses only proved the transfer of funds, not the legal character of the transaction as a loan, thereby failing the rigorous standard of proof required for contracts of this value.
Ruling: The appellate court’s decision was reversed, and the original trial court judgment dismissing the loan claim was reinstated.
Cassation File Number 109032
Date of Judgment: Meskerem 30, 2009 E.C..
Summary of Facts: A foreign corporation (respondent) sued for trademark infringement, alleging the applicants used its “Intercontinental” name for their hotel without authorization. The trial court dismissed the suit, ruling that a foreign company has no legal personality in Ethiopia unless it is registered in the Ethiopian trade register.
Legal Rule (Interpretation of Law): A foreign company that has registered its trademark in Ethiopia under Proclamation No. 501/98 possesses the legal personality to bring an infringement suit, regardless of whether it is registered in the Ethiopian trade register.
Reasoning: The purpose of trademark law is to prevent public confusion and protect an owner’s reputation. Registration in the trade register is a requirement for conducting business activities in Ethiopia, which is separate from the right to protect an intellectual property asset that has been legally registered with the relevant Ethiopian authority.
Ruling: The appellate court’s decision to allow the suit was affirmed, confirming that foreign trademark owners have the right to seek judicial protection in Ethiopia.
Cassation File Number 182772
Date of Judgment: Tahsas 29, 2013 E.C..
Summary of Facts: Buna International Bank took a vehicle as collateral for a loan in 2007 E.C.. Two years later, the police obtained a court stay (injunction) on the vehicle because the owner was accused of corruption. The bank requested the stay be lifted so it could sell the collateral, but lower courts refused, prioritizing the criminal investigation.
Legal Rule (Interpretation of Law): A registered and prior security interest (mortgage/pledge) held by a bank takes priority over a subsequent state stay or forfeiture order arising from criminal proceedings against the property owner.
Reasoning: Under Articles 2828 and 3059 of the Civil Code, a secured creditor holds a right in rem and has priority over other claimants. Established cassation precedents (File No. 81215) dictate that a bank’s prior right to recover its loan from collateral remains intact even if the property is later ordered forfeit to the state, provided the bank acted in good faith at the time the security was registered.
Ruling: The lower court decisions were reversed, and the stay on the vehicle was ordered lifted to allow the bank to exercise its foreclosure rights.
Cassation File Number 213835
Date of Judgment: Megabit 27, 2014 E.C..
Summary of Facts: A construction company (respondent) discovered that 1.8 million ETB had been paid from its account at the Commercial Bank of Ethiopia (applicant) via a forged check. The forged check had been deposited at Wegagen Bank and cleared through the electronic system. The trial court held the Commercial Bank liable because the signatures were “visibly different”.
Legal Rule (Interpretation of Law): The drawee bank (where the account is held) bears the primary legal responsibility to verify the authenticity of a signature on a check. Furthermore, a court may not declare signatures to be “dissimilar” based purely on its own visual inspection; such a determination requires expert testimony or peer-banker evidence.
Reasoning: In the electronic clearing system (EATS), the collecting bank has no way of verifying the drawer’s signature sample. However, the lower court violated the principles of evidence by acting as its own expert witness—judges must rely on professional testimony when deciding whether a signature was similar enough to pass standard banking scrutiny.
Ruling: The court affirmed that Wegagen Bank was not liable but reversed the finding against Commercial Bank of Ethiopia, remanding the case for expert verification of the signature similarity.
Cassation File Number 237038
Date of Judgment: Miyazia 30, 2015 E.C..
Summary of Facts: An insurance company (respondent) paid for vehicle repairs and sued the applicant’s insurance company for reimbursement more than two years later. The lower court rejected the statute of limitations defense because the driver (a co-defendant) had made partial payments, which the court ruled interrupted the limitation period for all parties.
Legal Rule (Interpretation of Law): Pursuant to Article 674 of the Commercial Code, an insurance subrogation claim is barred by a two-year limitation period. An act of interruption (such as partial payment) by one debtor interrupts the period only for that specific debtor and does not extend the liability of a separate legal entity like an insurance company.
Reasoning: Limitation periods are mandatory and must be strictly interpreted. While Article 1851(a) allows for the interruption of a period by admission, this is a personal act. The driver’s actions cannot bind the insurance company, whose liability is distinct and governed by its own legal timeframe.
Ruling: The lower court decisions were reversed, and the respondent’s claim against the insurance company was ruled barred by the statute of limitations.